Systematically Irrational Decision Making : An Evaluation of Decision Making Competence of Technical Experts and Decision Makers at Scania R&D

University essay from Blekinge Tekniska Högskola/Institutionen för industriell ekonomi; Blekinge Tekniska Högskola/Institutionen för industriell ekonomi

Abstract:

Purpose – The purpose of this exploratory thesis is to gain insights into the individual decision making competence levels for the decision makers and solution designers at production level at Scania Research and Development. And develop a simple framework for counteracting the negative influences of the cognitive biases and heuristics on the decision making process.

Design/methodology/approach – We used survey methodology to measure the competence in avoiding cognitive biases and heuristics. The survey is based on the Adult Decision Making Competency Survey (A-DMC) (Bruine de Bruin, et al., 2007). The survey measured the performance of the participants from Scania R&D on the analytic competences (Applying Decision Rules, Resistance to framing and Consistency in Risk Perception) and the heuristic decision making competences (Under/Overconfidence, Resistance to Sunk Costs and Recognizing Social Norms). The scores on the A-DMC not only reflect the performance on the measured component task but can be interpreted as indicator of normative decision-making competence in resisting the cognitive biases and heuristics. The survey has 135 question and received responses from total 55 participants from.

Findings – The research shows that the individual decision making competence scores of solution designers and decision makers shows no significant difference. On the other hand, age seems to clearly have a correlation with the analytic (negative) and heuristic (positive) decision making competence. We have also looked into the correlation between the A-DMC scores and Age/Experience of the survey respondents.

Research Implications – The research findings contribute to understanding of the relationship between the role, experience and age to the individual decision making competence using the A-DMC battery of questions.

Practical implications – All is not lost in the battle against the systematic irrationality and departure from the normative models of decision making. It is possible to counter act the negative influences of cognitive biases and heuristics on decision-making by spreading awareness and using simple frameworks. Companies can effectively prepare their staff by targeted trainings for decision making competence weaknesses in different age groups.

Keywords – individual decision making competence, cognitive biases, heuristics, product development projects, counter acting biases.

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